Tag: dealmaking

Canadian banks’ profits seen pressured by slower dealmaking, mortgage growth

A Royal Bank of Canada logo is seen on Bay Street in the heart of the financial district in Toronto

A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015. REUTERS/Mark Blinch/File Photo Acquire Licensing Rights

  • RBC, TD to kick off Canadian banks’ Q3 earnings Thursday
  • Most banks likely to show a rise in bad debt provisions
  • A slump in dealmaking, capital-raising to weigh on revenues

TORONTO, Aug 22 (Reuters) – Canada’s big bank results are expected to bring to light a number of challenges as lenders set aside more funds for bad loans in a tough economy that has also led to a slowdown in dealmaking and forced borrowers to rethink about new mortgages.

The big six banks, which control a majority of the market in the country, have had to brace for macroeconomic uncertainties and build reserves while also ensuring they have enough capital to meet new regulatory requirements in case of uncertainties.

“We expect another challenging quarter for the group,” KBW analyst Mike Rizvanovic said, adding that he expects slowing loan growth, higher expenses and higher provisions for credit losses.

The shares of the top five banks – Royal Bank of Canada , TD Bank (TD.TO), Bank of Montreal (BMO.TO), Bank of Nova Scotia (BNS.TO) and CIBC (CM.TO) – have lost between 2% and 8% so far this year. National Bank (NA.TO) has gained about 9% while the broader Toronto Stock Exchange’s index (.GSPTSE) has risen 2.2%.

The Bank of Canada has hiked interest rates ten times since March 2022, most recently in June after a brief pause in March. While the rate hikes help improve margins from money banks earn by lending out cash, the rates impact mortgages and borrowing costs.

Those dynamics, among others, have forced Bay Street analysts to lower their estimates but have largely maintained their rating to reflect

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